SafeSourcing Blog

It’s a shame when a company has to declare bankruptcy. Consumers suffer, employees suffer, suppliers suffer, and in fact all stake holders suffer.

In this authors many years working in the retail industry, companies seeking protection through bankruptcy as a way to reorganize has never gone away and probably never will and certainly is very common during challenging economic times..

Too many times however actions that could or should have been taken never get implemented or seriously considered in the name of relationship management, supply chain cooperation and maintaining the status quo.

The retail industry has never totally embraced the use of reverse auctions as standard approaches to procurement as measured by percent of spend under the management of these tools. For those companies that have, bankruptcy is probably not something they have to look forward to in their future.

Let’s look at a simple example of the bankruptcy approach. Company A has annual sales of nearly $2B from their 150 locations. The same chain has bottom line profit of $20M or 1% of sales. The company as a result of reduced sales which means reduced cash flow and resulting slow payment, get’s itself into trouble and decides to declare bankruptcy to deal with their problems. The immediate plan is to close 10 stores. Typically these stores employ 100 to 150 full and part time associates. So we are talking about losing 1000 to 1500 jobs. If we make the assumption that all things are equal (which they never are) single store sales in this model would equal about $13.3M annually or $255K per week. Losing these sales would impact the company’s net profitability by about $133K in profit per store or $1.33M for the ten store group. Cost of goods for this group of stores would be about 70% or $93.M. I think you’re beginning to get my drift, although rent and certain liability expense won’t go away, let’s assume when backing in to this that 99% of the chains cost for these stores goes away since net profit is 1%. The company from a simple cash flow perspective saves or $131M which minus restructuring charges would save about $11M per month.

Please visit with us again for tomorrows post to consider an e-procurement alternative to the above bankruptcy financial model.

We look forward to and appreciate your comments.

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What is SQF and how do should retail food companies implement it?

According to Dictionary.com a panacea is a remedy for all disease or ills; a cure-all or an answer or solution for all problems or difficulties. Although this author does not believe it to be a panacea, SQF is certainly an important building block if not a corner stone of any global food safety program.

The SQF (Safe Quality Food) Program is a leading, global food safety and quality certification program and management system designed to meet the needs of buyers and suppliers worldwide. There are two sections of SQF. SQF 1000 is targeted at primary producers and SQF 2000 is targeted at manufacturers and distributors. More detailed inforamtion can be found at www.sqf.com. Schools are held regularly around the country for both groups and detailed information about these schools can also be found at www.fmi.org under the calendar section.

There are ten basic steps to implementing an SQF Program. These steps are taken from the SQF manual.

1. The Buyer requests the desired level of certification to be achieved by the supplier.
2. The Supplier designates a staff member as its SQF Practitioner to lead development of its SQF System, or hires an external SQF Consultant licensed by The SQF Institute.
3. The SQF Practitioner is trained at a licensed SQF Training Center.
4. The SQF Practitioner conducts a gap analysis of the supplier’s current system.
5. The Supplier selects an SQF licensed Certification Body to perform a certification audit.
6. A Certification Audit is conducted consisting of a document review and on-site audit.
7. An Auditor recommends certification if no critical or major non-conformities are found and the audit result indicates an acceptable rating.
8. The Certification Body Review Council makes the final decision and the SQF Certificate and audit report are issued. The SQF Certificate is valid for 12 months.
9. If critical or major non-conformities are found, the supplier takes corrective action, which is verified before certification is granted.
10. Re-certification audits are conducted annually and within 30 days of the scheduled audit date. audit frequency can be either annual, semi annual or more frequent depending on the type of certificate issued and the risk level.

We appreciate and look forward to your comments.

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This years Green for Retail or G4R conference held by Chain Store Age Magazine and sponsored by dozens of suppliers offered some great insight as to savings opportunities that retail companies attribute directly to their green initiatives.

One area that was of great interest to this author was that of water conservation. Safesourcing is always looking for opportunities to create interest as to where our retail partners can hold reverse auctions that can have a positive impact on the environment and also save them money. So, let’s hold a toilet auction.

Ok, I know ha, ha, ha. In this case I am totally serious.

At this yearsG4R conference Elaine Aye, principal of Green Building Services from Seattle
told attendees that water conservation represents an opportunity for big savings. Aye recommended the use of low flow plumbing fixtures which for toilets use a minimum of 1.6 gallons per flush, even better would be the use of dual-flush technology where you can get .8 or 1.2 gallons per flush”. Aye also explained that retailers can also reduce their water use by installing low-flow aerators (.5gallons per minute) on faucets.

This begs some basic sourcing questions.

1. Do all stores today use this technology
2. For planned remodels, will all new construction include this technology?
3. How many times per day are the toilets in your public restrooms flushed?
4. How many gallons of water would the new technology save?
5. How much would your total water bill be reduced?
6. If you installed this technology chain wide how many gallons of water would you save?
7. How many suppliers can you find for an auction of this type?
8. What are the other initiatives these suppliers have in place that support your CSR initiatives?

If you think this is a silly idea, let’s hear your out of the box thinking by offer an guest post of a better idea. Here are the benefits to this idea.

1. Reduced water usage.
2. Lower construction costs.
3. Lower utility bills
4. New sources of supply that are environmentally focused.
5. Supports corporate social responsibility.

We look forward to and appreciate your comments.

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The CDC has launched a website that will track the Environmental causes of chronic diseases. SafeSourcing applauds this as another great step in support of long term impact areas that can benefit from companies CSR initiatives.

According to the Centers for Disease Control and Prevention or “CDC”; Measuring amounts of hazardous substances in our environment in a standard way, tracing the spread of these over time and area, seeing how they show up in human tissues, and understanding how they may cause illness is critical. The National Environmental Public Health Tracking Network is the start of that system.

What this author likes about this site is that information can be tracked over time for both state and local areas which will become richer over time. SafeSourcing will be adding links and rss feeds to this website that will display in the alerts section of our website www.safesourcing.com because we believe that information of this type can be a great measurement tool over the long term in support of the positive effects that better procurement practices can have relative to both product and environmental safety.

You can visit http://ephtraqcking.cdc.gov to learn more.

We look forward to and appreciate your comments.

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It’s easy to criticize and organization when they do not get things right. It should be just as easy to applaud their efforts when they do the right thing. In this case the FDA gets it right.

The FDA is one of more than 25 permanent rss feeds at SafeSourcing alerts located in the upper right hand corner of our website www.safesourcing.com. These feeds regularly update site visitors as to safety and environmental violations, concerns, recalls and other important information in the retail industry as the happen.

The U.S. Food and Drug Administration today announced a regulation expected to prevent each year approximately 79,000 cases of food borne illness and 30 deaths caused by consumption of eggs contaminated with the bacterium Salmonella Enteritidis.

According to the Centers for Disease Control and Prevention or CDC, A person infected with the Salmonella enteritidis bacterium usually has fever, abdominal cramps, and diarrhea beginning 12 to 72 hours after consuming a contaminated food or beverage.

We look forward to and appreciate your comments.

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The role of procurement is pretty clear. At least it is to retail procurement professionals. This author believes it is the most important job in retail.

Others may argue with the last sentence, so let’s be more specific as to the other departments that are vital, yet no where near as important or in the position to lead as procurement. Not store operations, not finance, not information technology, not loss prevention, not human resources. They all use the products and services you negotiate the terms, conditions and pricing for. The impact these organizations can have on the net profitability of a company pale by comparison to what can be accomplished by procurement professionals armed with the most current e-procurement tools. Every good and service for resale and not for resale that comes in to a retail establishment has to go through the procurement process. That means it goes through buyers, category managers and other spend authorized team members. So, with the role of being the most important department, it is also incumbent upon procurement thought leaders to seize the opportunity to lead by example. One area that deserves your attention is driving and supporting green initiatives and corporate sustainability initiatives beyond simply making sure the products you procure support eco friendly standards.

So where might procurement thought leaders aid their companies approach to sustainability efforts. The following are ten simple suggestions to stimulate your thinking. How many more can your team come up with?

1. Provide your team with the necessary tools to work from home and let them do so at least one day per week.
2. Ask your vendors to not come to the office weekly anymore. Have them communicate via the internet.
3. Host more e-negotiation events such as RFI’s as a standard way of procuring green certified products.
4. Use recycled office supplies such as soy based toners.
5. Make all corporate non shipping fleet vehicles hybrids.
6. Reduce the use of paper contracts.
7. Make sure all contractors for remodels and new construction are LEEDS certified
8. Use eco friendly compact fluorescent light bulbs (CFL’s) lighting at home and in the office.
9. Car pool.
10. Have a team whiteboard session on ways to use clean technologies such as wind, bio-fuel, solar etc.

As always, we look forward to and appreciate your comments.

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It seems like the summer has just begun, but buyers need to be thinking about back to school supplies. The actual supplies required differ from preschool to college aged students and teachers.

Unfortunately if you don’t have what the person (normally mom) shopping for all students is looking for; you may lose all of the affiliated sales and ultimately your customer.

How many times have shoppers come to your store looking for something simple and then leaving without buying anything? It probably happens more often than you think. On the other hand, if you have a well stocked department you might be surprised by the number of additional items customers buy when they find the primary item they were looking for.

Relative to school supplies, you should probably consider the following list of categories if you want to cover all of your consumers needs.
.
A. Academic Calendars & Planners
B. Arts & Crafts Materials
C. Accessories
D. Backpacks
E. Binders
F. Calculators
G. Chalk, Erasers & Cleaners
H. Computer Media
I. Crayons & Markers
J. Dies Punches & Accessories
K. Drafting Supplies
L. Educational Software
M. First Aid & Personal Care and Anti Bacterial Supplies
N. Glue, Tape & Self-Stick Notes
O. Index Cards,
P. Report Covers & Portfolios
Q. Locker Accessories
R. Maps & Globes
S. Paints
T. Paper & Notebooks
U. Pens, Pencils & Markers
V. Reference Books
W. Rulers & Compasses
X. Scissors
Y. Staplers
Z. Teaching Aids

Each of the above categories obviously has a number of products associated with it. At times any one of these products could support a reverse auction by itself based on the size of the retailer and the volume associated with the category. Ask your e-procurement supplier if they have specifications and a list of suppliers available that would allow you to develop a reverse auction like this in the short term .

We look forward to and appreciate your comments.

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The economy is improving and according to The National Retail Federation (NRF) Americans plan to spend more beginning with Independence Day.

According to NRF, consumers plan to come out of hiding for the 4th of July. “Americans are ready to kick-start summer and celebrate Independence Day,” said NRF President and CEO Tracy Mullin. “Retailers will be stocked with supplies for every celebration, from large family cookouts to trips to the beach.”

In our neighborhood, gas prices have gone down two weeks in a row, the streets are a little emptier and I’m sure that there are a lot of cook outs and barbeques planned for the upcoming three day 4th of July weekend.

SafeSourcing is pleased to have been able to assist retailers in procuring better quality, less expensive and safer products that also support the a reduced carbon footprint. For this we are truly grateful.

Happy 4th of July. Please enjoy your weekend safely and remember to recycle.

We look forward to and appreciate your comments.

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Sometimes inspiration can come from the most unlikely places. Using this urban jargon, are today’s procurement professionals “Balling til they Fall” or is it just business as usual?

During an interview early in my career the interviewer who was a scary regional vice president asked me why he should hire me from the large list of candidates he had interviewed.

My answer restated from above was simply that “I will do whatever it takes to get the job done”. I was told later by the same manager that my answer is what got me the job.

Last year I was clicking through the TV late at night and came across Snoop Doggs reality show called Fatherhood. In the show Snoop was talking about his wife’s business endeavors when he said, she will “Ball til you fall” and went on to explain that “Ball til you Fall” is when in life, do what you need to do to get your dough or money.

Too many of today’s procurement professionals are not taking the opportunity to express themselves to the industry in newer and easier ways. Too often we hear objections like the following.

1. That’s interesting but we just don’t have time to do new things.
2. This is the way we have always done things.
3. We don’t want to disrupt our present suppliers.
4. This is not a priority for us right now.
5. It’s not in our budget.

If we use Snoop Doggs analogy, are companies doing all that they can to get their money? It would seem that beyond all of the buzz words and technical jargon that the ultimate job of procurement in no particular order is to accomplish the following.

1. Improve your companies for resale and not for resale product and services quality.
2. Find new or alternative sources of supply for your products and services.
3. Insure product safety
4. Support environmental best practices.
5. Reduce current pricing.
6. Reduce the amount of time it takes to get the job done.
7. Mitigate corporate and consumer risk factors.

If new tools can accomplish all of the above why would any of the five objections ever apply?

“Ball til you Fall”.

We look forward to and appreciate your comments.

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This author has had the great pleasure of teaching the following course “Selling to the CFO” to hundreds of sales people with a variety of industry focus areas ranging from Loss Prevention to Procurement.

I was reading Michael Lamoureux’s post at Sourcing Innovation the other day. At Sourcing innovation Michael is referred to as the “Doctor” for good reason. If you have the procurement blues or other procurement focused illnesses you might just find the cure or at least a roadmap to it at this site. The post I was reading was titled “Does Your CFO Think All You Deserve is a Kick in the Face”?

To procurement professionals this may sound scary, but does not need to be. Quite frankly, the focus of all sales people should be the CFO. It’s great to have C level relationships, including the CEO, CPO, CIO etc. At the end of the day the CFO controls the purse strings if your solution is not included in the present budget and as such you will need his or her support. The good news is that the focus of all CFO’s is to make companies more profitable. This may be housed in terms like managing regulatory compliance or the reduction of process costs and improving asset utilization. At the end of the day it all means trying to insure stakeholder equity which means improving net profitability and increasing share value.

The reason this is so important for sales people to understand is if your solution can accomplish this in the present accounting period or during the present accounting year in any measureable fashion you will have an interested audience in the CFO.

Once in the CFO’s office, you need to be prepared to present your office in a concise way that is meaningful to the CFO. This means no buzz words or other industry speak. This means understanding the CFO’s company in great detail and presenting your solution to documented problems that your procurement solution will solve in terms the CFO uses every day. That means terms like COGS, EBITDA, Net Profit, IRR, Gross Margin and how you’re offering will impact these areas in a positive fashion immediately.

We look forward to and appreciate your comments.

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